USD/JPY Slumps to ¥155 as US and Japan Unite in Rare Joint Intervention

The dollar-yen pair plummeted to ¥155 on Monday after Japan and the US confirmed they had jointly intervened in the currency market. This rare joint effort, which was first coordinated since 2011 and their first joint effort to strengthen the yen through outright purchases since 1998, marked a significant shift in the dynamics of the dollar-yen exchange rate.

According to Scott Bessent, US Treasury Secretary, Friday's coordinated action aimed to counter 'disorderly yen movements'. Japan's finance ministry echoed similar sentiments, stating that intervention targets excessive volatility rather than a particular exchange rate. The operation was carried out by the Federal Reserve Bank of New York, which sold euros and bought yen through Goldman Sachs and Morgan Stanley.

The intervention process began with a 'rate check', where the Bank of Japan asked dealers for current dollar-yen prices and trading sizes. If the warning fails, Japan's finance ministry instructs the BOJ to enter the market and buy yen, usually by selling dollars. With both governments purchasing the same currency, traders betting against the yen faced unusually deep pockets.

Finance Minister Satsuki Katayama stated that Japan would not hesitate to conduct further coordinated interventions and remained in close contact with the US Treasury. This has turned the ¥160-to-¥164 region from a routine chart zone into somewhere yen bears may wish to tread carefully.